Lost 20% Down Payment, Want to Refinance

House is worth near what I owe now. Is it possible?

[physics]

Not really a webmastery question but I trust the people here more than anywhere else - so asking here in hopes some fellow (US) webmasters might know something about mortgages.

Basically I put 20% down on my current Arizona house which I bought in 2007. That money is gone now because of ... well for obvious reasons. The house is only worth 80% of what I paid so do the math :p

Anyway, when I try to refinance all I get is people saying they can't help me because the house is worth about what I want to refinance for. But when I read about Obama's making home affordable plan and all I'm sure I've seen things about people who ORIGINALLY put 20% down being able to refi without paying mortgage insurance, etc. Or I'm just imagining that because I want it to be true :) I even went through the whole refi process back in November (and paid the hundreds of dollars for a home estimate) only to be turned down for a refi by my current loan servicer, because of the LTV ratio. (Note that the LTV ratio has now gotten a little better - house is probably worth about 2% more than I owe, yippie :p) Problem is that I don't trust them because what's their motivation to help me? I've never missed a payment - is that part of the problem? Do I need to start missing payments to get any help around here?

So, maybe I'm just missing something and there is some way to get a better rate here. Any ideas?

[incrediBILL]

Do you actually have other bank accounts with the same institution lending you money?

I've found offering to either move or threatening to remove a large sum of money to/from an institution can motivate a local bank manager to help you make things happen, assuming you have a sum of money to move.

[weeks]

Nice thread drift. Good thing we have mods around here to watch out for that kind of thing.

I'm not certain we drifted that much. The larger context is useful in making a decision regarding how much and when he'll want to risk a re-finance.

Then weeks drifts a bit...

As a taxpayer, I'm not much into contributing to bailing anybody out. Insofar as orderly reorganization/liquidation, there's federal bankruptcy law; chapter 11 for corporate reorganization, chapter 7 for liquidation, chapter 12 for farmers and chapter 13 for persons who don't want to liquidate.

Yeah, lawman. I agree. The argument that was made was that we were risking a depression without the bailouts. This was an exception, "too big to fail," etc. And I'm not 100 percent convinced that threat wasn't real. Even with 20/20 hindsight, I think, whew! But, still, it leaves an awful aftertaste. It stinks.

[physics]

Re: drift. Wow people seem to expect a lot out of a Foo thread that was way off topic from webmastery in the first place :)

[incrediBILL]

No offense to Physics in his situation since I don't know all the details, but I'm most amused by are those home owners that sat on their haunches when everybody was refinancing and did nothing about it that now are crying the blues when the housing market is upside down.

Heck, we didn't even try to refinance, Citibank practically shoved refinancing at a much lower rate down our throat to make sure they didn't lose us as a customer.

My mortgage is so low now I could move out today, thanks to Citibank, rent the place, and actually make double the mortgage for what homes in our area rent for and live rent/mortgage free elsewhere.

I'm just sayin...

---

Slightly off topic but similar enough:

FWIW, property in some states is SO cheap it's crazy. Just bought the daughter and son-in-law a duplex in OHIO that was abandoned in mid-renovation for about $7K and completion on renovations will be roughly another $7K. It sold for $75K about 3 years ago. Rent prices in the area (it's location location) will repay that and be cash positive in one year.

Renting property isn't a problem, it's people that were upside down in overpriced renovations and property flippers that was the problem, and now the banks are overflowing with them and I'm picking them up at fire sale prices.

Won't go into specifics but we plan to do a few this year :)

If you're willing to do a little work, this is definitely a buyers market, there are fire sale prices everywhere, and you too could easily become a land Barron within a couple of years.

For someone looking for a nice home that's technically FREE, buy a nice duplex in the $100K range and let your tenant on the flip side pay rent (your mortgage) and live rent/mortgage free off your earnings.

Seriously, it's a buyers market, use it to your advantage if you have any cash or equity you can leverage to make a purchase because IMO it'll be a great windfall when the housing market reverses in a few years.


TIP: offer 50% below asking price to start bartering on anything on the market at least a year and you'll be pleasantly surprised - people are desperate to sell.

[bluntforce]

incrediBILL, At the risk of going further off-topic, I'll venture to say you probably aren't the first person to note there are different property values in different parts of the United States. There are reasons for that.

Duplex, or 1-4 unit owner-occupied can certainly provide long term benefits while retaining beneficial interest rates due to the owner occupied status.

In a low price market, a 50% off offer may make sense, in a higher priced market, that kind of offer wouldn't get any kind of serious consideration from anyone.

One point of caution. Establishing value, or potential value, based on what a property sold for in the days of "fog a mirror" financing can come back to bite you. Perhaps a better indicator would be "what could I get for the property if I had to sell it tomorrow".

I've looked at moderately priced real estate markets and contemplated moving just to take advantage of being in a market without being dependent on those area market incomes. Problem is, I like where I live.

[weeks]

Good advice bluntforce...but,...

Bill is also right in that there are some amazing deals out there right now. He is also right that offering 50 percent below the asking price is not nuts, especially on properties now held by a bank (especially an out-of-state bank that didn't even know they had bought the paper on the property) that were started but not finished. I mean, paying for legal work for zoning on some of the properties would cost half about what they'll take.

But, from reading your posts here, you likely know that.

[weeks]

Problem is, I like where I live.

Yeah, same here.

You smart, happy people are messing me up! The really, really nice resort/university areas--people like you haven't gone crazy there yet. Alas. My wife and I were thinking, heyyyy, this could be our chance..., so, we checked it out. Nah. Nuts. We were all excited...for about 48 hours...oh well, back to reality.

[incrediBILL]

Perhaps a better indicator would be "what could I get for the property if I had to sell it tomorrow".

Currently that's not an issue - no plans to sell, strictly income property.

At these prices the ROI from renting is better than any stock investment.

If the market goes back up, selling could be an option :)

[physics]

Found it! This is what I was trying to get my mortgage lender to do:
Making Home Affordable HARP [makinghomeaffordable.gov]

6.Will refinancing lower my payments? How might HARP benefit me?
The objective of a refinance under HARP is to provide creditworthy homeowners who have shown a commitment to paying their mortgage the opportunity to get into a new mortgage with better terms.

10.I owe more than my property is worth. Do I still qualify for a refinance under HARP?

Eligible loans will include those where the first lien mortgage does not exceed 125% of the current market value of the property. For example, if your property is worth $200,000 but you owe $250,000 or less on your first lien mortgage you may qualify. The current market value of your property will be determined after you apply to refinance.

4.How do I apply for a refinance under HARP?

Call your mortgage lender, or any lender approved to do business with Fannie Mae or Freddie Mac, and ask for a Home Affordable Refinance application. The number is on your monthly mortgage bill or coupon book. Please be patient yet persistent....

16.Will I need mortgage insurance on a HARP refinance?

If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for a refinance under HARP. If your existing loan does not have private mortgage insurance, it will not be required as part of a refinance under HARP.

They told me that even though this HARP thing is supposed to go to 125%, they only go to 95% so wouldn't help me. I also think they funneled me into the wrong refinance process purposefully even though this is what I asked for. This HARP thing is the common sense help for responsible homeowners that I've been talking about. Yet, it's apparently impossible to use in practice because of either the lack of compliance or stonewalling and deception by my mortgage lender.

[edited by: physics at 3:39 pm (utc) on Jul 21, 2010]

[incrediBILL]

Is your loan owned or guaranteed by Fannie Mae or Freddie Mac?

[physics]

Yes.

[physics]

or any lender approved to do business with Fannie Mae or Freddie Mac

Believe it or not I also called another lender and tried to get a HARP refinance. They gave me the same story as my current lender - bad LTV.

[incrediBILL]

Here in the SF Bay Area they're running news stories all the time on refinancing troubles and scams, sounds like it's time for some help from the "eye on 5" or "7 on your side" to make these idiots refinance or explain to the viewing audience why they don't honor HARP/HARM programs.

As a matter of fact, it's a good timely story the news will love as there have been 580K foreclosures in the US in the 1st 6 months already and estimates we'll hit 1M by year end, compared to 900K last year, and a typical year of foreclosures is 100K.

[bluntforce]

incrediBILL, didn't mean to imply that a cashflow purchase in a lower price market was a bad idea, just trying to make sure readers use caution in their valuations.

weeks, 50% offers on unfinished properties could be reasonable. Been there, never do it again. :)

[physics]

Interesting WSJ article about all of this [online.wsj.com...]
One that frustrated me, reading that, is that I don't fall into any of those "complications" categories, plus the fact that the home isn't even "underwater". Also, there's talk in there about there being confusion about the rules. Their whole 'raison d'etre' is to understand those sorts of things and help people get loans/refinances/etc. If they can't do that why the heck can't I just borrow straight from Fannie or Freddie (I realize this is impossible, just sayin'). Seems that the mortgage lenders will 'create' complications whether they actually exist or not.

[weeks]

weeks, 50% offers on unfinished properties could be reasonable. Been there, never do it again. :)

LOL. I actually have a plan for the property, however. But, your point is well taken.

[weeks]

physics said:

interesting WSJ article about all of this [online.wsj.com...]...
...why the heck can't I just borrow straight from Fannie or Freddie (I realize this is impossible, just sayin'). Seems that the mortgage lenders will 'create' complications whether they actually exist or not.

Well, actually, that's not unreasonable at all. Take a look and how they have reworked the federal student loan programs.

I'm not trying to be cute or funny here: Bankers, especially retail bankers, are typically not the most innovative people in the world. Wait, that didn't come out right. Retail bankers are (typically) dumb as doorknobs. Which is a problem because this stuff can get complicated.

But, the fact of the matter is that it's impossible to find even sharp people willing to take a chance on real estate today. As the Fed Chairman said yesterday, the pace of the "recovery" is uncertain. For example, your house might not be worth what you paid for it until, say, heck freezes over. Or five years.

Just be glad you didn't buy several houses as investments in 2007. Hey, what could go wrong...?

[physics]

Seems I'm not the only one noticing this problem (phew)

Only 390,000 homeowners have seen their mortgage terms permanently modified since the $50 billion program was announced in March 2009. That is a small fraction of the three to four million borrowers who were supposed to receive assistance under the program, which is financed by money from the $700 billion Wall Street bailout authorized in late 2008.

Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, as the bailout is called, testified that “one of the greatest failures” by the Treasury Department had been the absence of clear goals for the program.
[nytimes.com...]

On the bright side I *finally* realized that the great oracle, GOOGLE (yay, now this thred is relevant!) might have the answer to my woes. So I typed in 'HARP refinance' - found some lenders who *gasp* might actually *want* my money and be willing to do a HARP refinance. Fingers crossed.

[weeks]

Saw this item on the Washington Post's website today:

More than 160 homeowners lined up in downtown Washington before dawn Friday in hopes of obtaining better terms on their home loans with help from the housing advocacy group Neighborhood Assistance Corporation of America.
[voices.washingtonpost.com...]
The NACA's program might give you some insights into some of these programs. But, maybe you could make some $ offering to fix their website. It's been a loooong time since I last saw an "error message" that said I HAD to use IE. (And the error message has a typo in it.)
[naca.com...]
That said, these folks look like their seriously kicking some banking butt, smartly focusing their anger to make things happen. Impressive. Good luck to them.

[weeks]

Talk about being on-topic. This from an article today in the NYT:

The amount of equity a person has in his home, his debt-to-income ratio, his job stability and his cash reserves are all better predictors than credit scores, according to Dave Zitting, the chief executive of Primary Residential Mortgage, a leading mortgage lender. And yet, he said, “The credit score has become the line in the sand for the banks.”
[nytimes.com...]

[lawman]

Thread about my credit score from last year:

[webmasterworld.com...]

[Jane_Doe]

The whole credit score is a consumer scam. They don't even look at your assets.

The credit agencies make it easy for crooks to steal your identity and you are guilty until you prove yourself innocent. Then they come up with a solution that forces you to pay them money each month to monitor your scores to prevent a problem they created.

We had some store enter my husband's SSN on a late payment report. Everything else was different - the person's name, address, etc. The address was a city where we never lived. The birth date was different. Yet when we went to refinance our house they expected us to prove that it wasn't him, which is like proving there is no Santa Claus. So this one credit entry was holding up refinancing on a house we had already been living in for over a decade, never missed payments (even at much high interest rates), had more than enough income to qualify and at least 50% equity in our home at that time.

Of course nothing happens to the store so they have no incentive to make sure their records are accurate in the future. And of course nothing happens to the credit agencies either. The burden of proof is entirely on the consumer.

The whole system is one big logic flaw.

[weeks]

Worthwhile update on this thread regarding refinancing your house...

AP article from last Friday:

Don't get your hopes up. And that's a good thing, since ushering in a refinancing boom would only be a short-term fix for the housing market and the economy that would have long-term consequences.

A widespread refinancing of loans would mean reverting to looser lending standards, one of the things that got us into this mess. It could also boost mortgage rates for new borrowers and force U.S. taxpayers to shoulder more risk, since they technically own Fannie and Freddie. ...

Hitting the mortgage reset button could put more money into homeowners' pockets today, and would also give the economy a quick jolt. But the ultimate costs are too high.
[washingtonpost.com...]

[physics]

Just want to update this old post with some good news - I was able to refinance to a much better rate :)

It was a year ago that I first tried to take advantage of the refi programs that allow people who paid 20% down to refi to a good rate without paying PMI (I believe the program is technically called DU Refi Plus ). I'm ecstatic to say that it finally happened. Some banks are finally willing to go to 105% LTV and rates are low. My old lender rejected all of my attempts to work with them and even made sure to draw out the process for several months - but now I'm laughing all the way to the (other) bank.

If anyone wants the name of a great loan officer, PM me :)


Some advice to anyone in a similar situation:

- Find a loan officer that you can actually talk to and level with, even better someone that you know personally or a relative knows personally. The big loan sweatshops - like one I wasted time with that rhymes with 'wicken' where you just call and get a random tool assigned to you can be, well just a waste of time (and money).

- Learn all that you can about mortgages
I strongly recommend these books
[amazon.com...]
[amazon.com...]

- Avoid paying points - if they offer you a rate with points ask for what the rate would be without points (I learned that from one of the books, and was able to get a good rate without paying points).

[physics]

weeks, as far as I'm concerned that article is flat wrong. To qualify for these programs you have to have not missed a payment in 12 months, so you're not exactly a 'loose lending standards' risk. And the loan is already owned by Fannie or Freddy. If anything it stabilizes the loan since you're more likely to be able to pay it. Also, people like me tend to (for better or worse) find ways to spend money on other things they need, like christmas presents or a washing machine for example, when they save money on their mortgage - so having lower payments can help stimulate the economy.

[LifeinAsia]

- Avoid paying points - if they offer you a rate with points ask for what the rate would be without points (I learned that from one of the books, and was able to get a good rate without paying points).

Just a comment that it's not always the case. Figure out how long you plan to stay in the house and do the math. In general, the longer you plan to stay in the house, the more likely that points may make sense.

[weeks]

weeks, as far as I'm concerned that article is flat wrong. To qualify for these programs you have to have not missed a payment in 12 months, so you're not exactly a 'loose lending standards' risk. And the loan is already owned by Fannie or Freddy. If anything it stabilizes the loan since you're more likely to be able to pay it. Also, people like me tend to (for better or worse) find ways to spend money on other things they need, like christmas presents or a washing machine for example, when they save money on their mortgage - so having lower payments can help stimulate the economy.

With those qualifications, you are right on. Banks should be able to some investigation into the party making the loan and take a reasonable risk--and make some money.

But the article says

A widespread refinancing of loans would mean reverting to looser lending standards.

There are people who think that "I want a loan, I should get a loan." And, it was that way for a while. We don't want to go back to that. But, yes, you deserved a better rate and not giving people such as you a loan is bad business and bad economic policy.

Congrats on the deal. Good work!

[Demaestro]

Man I feel for you... so sad that the responsible ones are the ones who really get bent over because of the ones who weren't responsible.

I have seen stories about people actually recommending walking away from your mortgage.

There was a good one from a University of Arizona professor law prof Brent T. White. He also wrote a book called...... "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

[money.blogs.time.com...]